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SEC Chief Says She Supports Universal Fiduciary Rule

March 18, 2015

SEC chairman Mary Jo White revealed on Tuesday that she supports applying a fiduciary standard to all financial advisors regardless of the channel they work in, The Wall Street Journal reports.

Addressing a Securities Industry and Financial Markets Association meeting in Phoenix, White told her audience she considers it “the right thing to do” to require that brokers, as well as RIA advisors, put clients’ interests ahead of their own, according to the Journal. It was the first time White has tipped her hand about her opinion on the controversial question of whether the brokerage industry should continue to operate under the less stringent suitability standard — although she has been hinting for about a month that she was about to break her silence.

With Tuesday’s remarks, she jumped into an already heated fray. As FA-IQ has reported, the Obama administration recently threw its weight behind a Labor Department proposal to require that advisors in all channels who consult on employer-sponsored retirement plans be fiduciaries. Sifma, among other brokerage-industry trade groups, strongly opposes that idea. After White’s speech, a Sifma attorney told Reuters, “We would hope that the SEC’s moving forward on this would provide further confirmation that the DOL should not move forward.”

But it’s far from certain the SEC will actually propose a universal fiduciary rule. The agency’s Republican commissioners, Michael Piwowar and Daniel Gallagher, think enhanced disclosure by financial advisors — along the lines of truth-in-lending disclosures — is a better idea. And although White’s support for a universal standard breaks the partisan tie at the SEC, as Bloomberg reports, there’s no guarantee its two Democratic commissioners will fall into line behind her once the cost-benefit analysis gets under way.

Even if the agency does propose a universal standard, it may wind up looking nothing like the fiduciary rule that currently applies to RIA advisors. Indeed, Sifma would rather see a rule from the SEC than from the Labor Dept. because the commission seems inclined to “harmonize” the fiduciary and suitability standards rather than replace the latter with the former, as Labor would do.

Nearly two years ago, the CFP Board, Napfa and the Financial Planning Association — among other groups representing fee-only advisors — joined AARP and the Consumer Federation of America in urging the SEC not to water down the fiduciary standard when writing new rules for broker-dealers.

And some industry observers think the brokerage industry has already won this battle. For example, Financial Planning columnist Bob Veres considers the notion of “harmonization” a great victory for the big Wall Street firms and their lobbyists.

By Joan Warner
  • To read the Bloomberg article cited in this story, click here.
  • To read the Reuters article cited in this story, click here.
  • To read the Wall Street Journal article cited in this story, click here if you have a paid subscription.